How the USDA Wastes Your Money

by Reed Irvine and Cliff Kincaidon February 26, 2001

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Our government has squandered over a half-billion dollars paying out $50,000 each to twelve thousand blacks who claimed that they were victims of discrimination when they applied for government farm loans.

Two lawsuits charging discrimination that were filed in 1997 were certified as having class-action status. Lawyers for the plaintiffs launched a drive to get more blacks to join in the suit. They thought that about twenty-five hundred would do so.

The U.S. Department of Agriculture (USDA) spent half a million dollars on ads to inform blacks of this opportunity to collect an easy fifty thousand dollars from Uncle Sam. By the closing date in October 1999, over twenty thousand blacks had signed up. That exceeds the total number of black farmers in the country. All they had to do to qualify was submit a letter claiming that they had applied for the USDA farm loan between 1981 and 1997 and had been turned down or had obtained a loan on terms that were discriminatory. They had to have someone who was not a family member vouch for the validity of their claim.

Most of these claims were filed after the two-year statute of limitations for filing discrimination suits had expired, but prodded by the Black Caucus, Congress waived the statute of limitations for claims from 1981 through 1996. This put USDA at severe disadvantage and opened the door for fraud. The department kept records of rejected loan applications for only three years, and so it couldn’t tell if the great majority of the claimants had ever applied for a loan. It was in a better positions to contest claims of discriminatory treatment in cases where loans had been made. It had the records, and in those cases, most of the claims were rejected.

As of January 17, over 12,000 cases had been decided in favor of the claimants. The Justice Department is paying $50,000 to each successful claimant, a total of 600 million dollars. It could have been much more, but many of the claims were clearly fraudulent. For example, a lot of them were found to be photocopies of other claims.

The USDA had records on less than ten percent of the successful claimants. There is no way of knowing how many of the others ever had any contact with the USDA, but they all get their fifty thousand dollars.

Much of the blame for this waste of taxpayers’ money lies with Judge Paul Friedman, a Clinton appointee who presided over the case, and with Clinton’s Secretary of Agriculture, Dan Glickman. Glickman did not defend his employees from unfair charges of racism. The judge made it easy for the plaintiffs to file fraudulent claims and win fifty grand. He has now extended the deadline for new applicants to get on this gravy train.

As a result, the number of black claimants has risen to twenty-five thousand. Now Hispanics, Asians and even a mostly white group of farmers have filed suit, claiming that the USDA treated them the same way it treated blacks. The General Accounting Office is looking into the matter asking why so many people who collected $50,000 appear to have no connection with agriculture.